Lenders Set to Scuttle Continental / Shaeffler Merger

| About: Continental AG (CTTAY)

The second most favorite German soap opera on Zero Hedge (just after the Volkswagen - Porsche melodrama) looks set for a second season. Bloomberg is reporting that lenders who hold half of Conti's (OTCPK:CTTAY) humongous €11 billion debt load will do all they can to prevent the merger. It's funny it took lenders only about a year to get their case of buyer's remorse sufficiently well crystallized.

Now if only Deutsche Bank (NYSE:DB) could be sued in some fashion for half a billion dollars for breaching something or another, it would be a perfect case study of investment banking in the 21st century, where IBs make their clients richer by i) reneging on contractual financing or otherwise obligations and ii) paying exorbitant settlement amounts (while filing 8-K how the steep curve is a blessing and everyone will soon be a billionaire... if only those pesky consumers were to start borrowing again).

From Bloomberg:

The banks are concerned that the debt at a merged company would be too high, hurting chances Continental would be able to pay it all back, according to the people, who asked not to be identified because the discussions are private. The creditors are aiming to create enough backing to block changes to a loan agreement first reached in 2007, said the people.

“Continental can do very little without the approval of its banks,” Bjoern Voss, an analyst with M.M. Warburg in Hamburg, Germany, said in a telephone interview.

Continental Chief Executive Officer Karl-Thomas Neumann aims to submit a plan by Aug. 1 and the alternatives include merging operations of the two auto-parts makers. Schaeffler is based in Herzogenaurach, Germany.

Seems like the merger is all but done - now if only people were to start using Conti's products despite the complete collapse of the auto sector, the banks may really have no reason to worry any more. One can bet lawyers are chomping at the bit for this one: if recent (lack of) M&A transactions are any indication, someone in this drama will end up paying a boatload of money to settle this overhyped merger, put together at the very peak of the auto market.